The International Monetary Fund’s (IMF’s) new G20 report on strong, sustainable, balanced and inclusive growth (SSBIG) puts regulatory and institutional reform at the centre of the growth challenge. The report estimates medium-term G20 growth at only 3 per cent, close to its weakest level since the SSBIG framework was launched in 2009. About half the G20 advanced economies and nearly three-fourths of the emerging-market economies face growth constraints from overly restrictive regulations on labour markets, product markets, or consumer markets. For India, this is particularly relevant even as the economy grew 7.8 per cent in the first quarter this financial year (April-June), while investment rose 11.9 per cent compared to 5.8 per cent in the same quarter last year. As the IMF notes, in G20 emerging markets, inadequate regulatory and institutional frameworks themselves are significant barriers to private and public investment. The report identifies underdeveloped capital markets, weak public-investment management, and deficiency in governance and institutional quality among the most important impediments to investment. It also highlights “intrajurisdictional” barriers, differences in business regulations, professional licensing, internal trade rules, labour mobility, and conditions for firm growth, which can fragment otherwise large domestic markets.
